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Labour market flexibility and regional unemployment rate dynamics: Spain 1980–1995

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  • Roberto Bande
  • Marika Karanassou

Abstract

This article aims to shed light on the dynamics of Spanish regional unemployment rates and determine the driving forces of their disparities. The Spanish economy has one of the highest unemployment rates in the EU and is characterised by severe regional disparities. We apply the chain reaction theory of unemployment according to which the evolution of unemployment is driven by the interplay of lagged adjustment processes and the spillover effects within the labour market system. Our model includes nationwide as well as region‐specific variables, and takes into account the limited labour and firm mobility in Spain. We show that the degree of labour market flexibility differs between high and low unemployment regions, and find that investment has a major influence on the unemployment trajectory. In addition, we find that in bad times high unemployment regions are hit more severely than low unemployment regions, while in good times, high unemployment regions do not benefit as much as low unemployment regions. Resumen Este artículo pretende aportar algo de luz sobre las dinámicas de las tasas de desempleo regional en España y determinar las fuerzas motrices de sus disparidades. La economía española posee una de las tasas de desempleo más altas de la UE y está caracterizada por serias disparidades regionales. Aplicamos la teoría de la reacción en cadena del desempleo de acuerdo con la cual la evolución del desempleo está impulsada por la interacción de procesos de ajuste retardado y efectos de spillover dentro del sistema del mercado laboral Nuestro modelo incluye variables de ámbito nacional y específicas para las regiones, y tiene en cuenta la mano de obra limitada movilidad de mano de obra y empresas en España. Mostramos que el grado de flexibilidad del mercado laboral es diferente entre regiones con alto y bajo desempleo, y encontramos que la inversión tiene una influencia principal en la trayectoria de desempleo. Además, descubrimos que en tiempos de crisis las regiones con un alto desempleo sufren más que aquellas con un bajo desempleo, mientras que en tiempos de bonanza, las regiones con un elevado desempleo no se benefician tanto como aquéllas con un bajo desempleo.

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  • Roberto Bande & Marika Karanassou, 2009. "Labour market flexibility and regional unemployment rate dynamics: Spain 1980–1995," Papers in Regional Science, Wiley Blackwell, vol. 88(1), pages 181-207, March.
    • Handle: RePEc:bla:presci:v:88:y:2009:i:1:p:181-207
    DOI: 10.1111/j.1435-5957.2008.00165.x
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    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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